Regulatory takings « Disasters, Property, and Politics

Today the US Supreme Court handed down their decision in Murr v. Wisconsin. In a 5-3 vote (Justice Kennedy writing for the majority, Justice Gorsuch not participating), the Court determined that there was no regulatory taking in this case.

In takings parlance, Murr v. Wisconsin what we refer to as a regulatory takings case. That is, it’s a case in which the title of the property remains in the hands of the owners (so no physical taking), but a regulation on the property may have changed the land’s uses in such a way that the owners no longer can find economic benefits in the land. In the case of the Murrs’ property, as already mentioned, the Supreme Court upheld an opinion in which there was no regulatory takings in this case. In doing so, they also reaffirmed several key regulatory takings cases, including Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency (535 US 302), Lucas v. South Carolina Coastal Commission (505 US 1003), and a takings case I’ve written a lot about, Palazzolo v. Rhode Island (533 US 606).

To better understand Murr, here are a few facts from the case (I’m simplifying here for brevity — I’ll do more detail in a future post):

Mr. and Mrs. Murr had purchased Lots E and F in a particular area along the St. Croix River in Wisconsin separately at two different times in the 1960s. They used the land for recreational/vacation purposes, and maintained the two lots under separate ownership for tax purposes until they transferred them to their children (Lot F in 1994 and Lot E in 1995). At that point, the two lots came under one ownership (with multiple individuals owning the land). Their children, who are the petitioners in this case, wanted to sell Lot E in order to pay for improvements to Lot F. They sought variances from the St. Croix County Board of Adjustments, but were denied the request. The Board said that because the lots had been unified in their ownership in the 1994/1995 transactions, they could no longer be sold separately under a local zoning regulation. The question for the Supreme Court, then, had much to do with whether a taking occurred when these owners were told that they could not sell Lot E without selling Lot F. The petitioners contended that the economic benefits of Lot E had been completely removed by the regulation and therefore they should be compensated for a regulatory taking.

Writing for the Court, Justice Kennedy argues that while it’s long been understood in regulatory takings jurisprudence that if a regulation goes too far it can be recognized as a taking, he explains that in this case there’s no regulatory taking because the land can still be used for economically beneficial purposes. Murr is an interesting case in part because it presented a question that is key to the analysis of regulatory takings: What is the proper unit of property against which to assess the effect of the challenged governmental action? In other words, can a part of a parcel be used in a regulatory takings analysis? Or does it have to be the parcel as a whole? Today’s decision says it’s the parcel as a whole, and how we know the whole parcel has to do with the zoning regulations of the locality.

The Court determined that a lower court decision had correctly determined that the petitioners could not have reasonably expected to sell the lots separately given the current zoning laws. The lower court had found that combining the lots lessened their value by less than 10%, which was not enough to declare a takings under Lucas and other regulatory takings cases. From the US Supreme Court’s perspective, the issue of which unit of property to use in a regulatory analysis was key to deciding the case. Since they agreed with the lower court that the appropriate unit was the entire parcel, and not the separate lots, they also found that the regulation had not decreased the economically beneficial uses of the land enough to work a regulatory takings.

The majority opinion is, of course, more complex than I’ve written here. I’ll be doing another post soon that will go into more detail, and will also take a closer look at the language around Palazzolo v. Rhode Island. There’s also a very interesting dissent that was filed by Chief Justice John Roberts, in which he argues that the majority’s opinion undermines regulatory takings jurisprudence in a way that will make it very difficult for any regulatory takings plaintiff to succeed in the future. Logan will be taking a closer look at the dissent in an upcoming post. We agreed this morning that it deserves its own analysis partly because this decision was so close. Presumably, had Justice Gorsuch participated he would likely have agreed with the Chief Justice. That would have made the decision 5-4. That, to me, suggests that the next justice of the Supreme Court may be the deciding vote in moving regulatory takings jurisprudence onto a different course should we have another conservative justice appointed to the Court. On the other hand, if the next justice is a liberal, we’ll continue to see 5-4 and 6-3 splits on these cases.

Just by way of a reminder, when it comes to physical takings, the Court has been much more unified. We can see that in recent cases such as Arkansas Game and Fish v. US, in which a temporary physical takings was found when an area was repetitively flooded. That decision was unanimous, and written by Justice Ruth Bader Ginsburg, well known as one of the most liberal justices on the current court (some would say she’s the most liberal, but I suspect Justice Sotomayor may overtake her given time).

So, as posted earlier, this the morning US Supreme Court handed down a fascinating takings decision in Horne v. Department of Agriculture. I think as both Logan and I work through the decision, we’ll do a series of posts. Logan had written about the case as it made its way through the courts (you can find those posts here and here).

Here are some of the highlights from Chief Justice Roberts majority opinion (all quotes come from the Horne Slip Opinion, which I’ll just identify as “Slip Opinion”):

The Court determined, contrary to the Government’s argument and a decision by the Ninth Circuit, that first, personal property is as protected as real property from being taken. To quote the Chief Justice, “The Government has a categorical duty to pay just compensation when it takes your car, just as when it takes you home” (Slip Opinion, p. 5). There’s a lengthy discussion in the decision concerning the history of the takings clause and why agricultural crops, in particular, have featured in that history.

Toward the end of that historical discussion, Chief Justice Roberts writes,

“According to the author of the first treatise on the Constitution, St. George Tucker, the Takings Clause was ‘probably’ adopted in response to ‘the arbitrary and oppressive mode of obtaining supplies for the army, and the public uses by impressment, as was too frequently practiced during the revolutionary war, without any compensation whatever.’ [citing Blackstone’s Commentaries] (Slip Opinion, p. 6).

This brings the Chief Justice to the distinction between regulatory and physical takings, which for the majority is very important in this case. They see appropriation of raisins as a physical taking of private property rather than a regulatory taking. This matters because the constitutional rules around physical takings are pretty simple: if the government physically takes property, just compensation is due. However, it’s more complicated with regulatory takings, which Chief Justice Roberts says are more flexible and more forgiving than the jurisprudence around physical takings. Indeed, regulatory takings cases require, under Lucas v. South Carolina Coastal Council, a “total wipe-out” of value before they require just compensation.

Again, quoting from today’s decision:

“Lucas, however, was about regulatory takings, not direct appropriations. Whatever Lucas had to say about reasonable expectations with regard to regulations, people still do not expect their property, real or personal, to be actually occupied or taken away. Our cases have stressed the ‘longstanding distinction’ between government acquisitions of property and regulations… The different treatment of real and personal property in a regulatory case suggested by Lucas did not alter the established rule of treating direct appropriations of real and personal property alike.”

The distinction provides the Court with the basis for overturning the Ninth Circuit’s opinion because the Ninth Circuit had used Lucas to decide Horne — and today, the Court says that this was the wrong line of precedents to apply in deciding a case involving the physical taking of personal property (i.e., the raisins).

There’s a few things that I find especially interesting in the decision: first, there’s a strong implication that the Supreme Court would have seen a regulation that limited production of raisins differently than a law that required the surrender of already produced raisins to the government. Chief Justice Roberts writes,

“A physical taking of raisins and a regulatory limit on production may have same economic impact on a grower. The Constitution, however, is concerned with means as well as ends. The Government has broad powers, but the means it uses to achieve its ends must be ‘consistent with the letter and spirit of the constitution.’ [citing McCulloch v. Maryland]”.

The issue that matters to the Court in Horne is that the raisins were actually physically taken from the owners. Or would have been, had the Hornes complied with the law (which they did not — and were fined the market value of the raisins ($438,000) plus an additional $200,000 for breaking the law by not surrendering the raisins — something the majority says they did not understand they were required to do).

That brings me to another interesting point: the Chief Justice mentions more than once that this program is mandatory and not voluntary. Chief Justice Roberts says that had it been voluntary, of course, there would be no taking. This is also interesting… Between this and the language around a regulatory limit on production vs. a taking of produce, I wonder if there are not hints here concerning what the Court thinks would be an acceptable way to control the raisin market… But that’s just a thought that ran through my mind as I read through the case. There is no indication that the majority were sending such signals to Congress in the actual text.

While the 8-1 decision (Justice Sotomayor was the lone dissenter) on the issue of whether the raisins were taken seems to really hinge on the idea that the raisins are personal property that was physically taken away and is pretty straight forward, the decision becomes a little more complicated on the issue of just compensation. On the issue of determining what just compensation is, the Court split 5-4. In the minority, three of the four (Justices Breyer, Ginsburg and Kagan) wanted the case to be remanded back to the Ninth for an inquiry into whether the price of the raisins in the years that were of concern in the case would have yielded just compensation to the Hornes for the loss of their raisins. Chief Justice Roberts and four other members (Scalia, Kennedy, Thomas and Alito) decided, however, that in levying a fine of the market value of the raisins, the Government had already determined what the just compensation should be. That just compensation should be the market value of the raisins. Moreover, they were concerned because the value of the raisins is itself set by “the taker”, i.e., the Government. This was clearly an issue for the 5 who believed that the market value assessed by the Government was the best way to go. The implication, from my reading, is that they did not want to leave it to the Government to decide whether “just compensation” had been provided by the price of the raisins. I’ll go into that issue when I discuss the concurrence in another post. Therefore, the Supreme Court said today the Hornes do not owe the fine to the Government.

One last interesting note: in deciding not to remand the case, the Chief Justice points out that the case had been nearly a decade in litigation, and that it was time for the matter to be settled. He should know a lot about takings cases that take a long time — he was the lawyer that argued Tahoe Sierra Preservation Council v. Tahoe Regional Planning Agency for the agency (i.e., the regulator — yes, he was a hired gun at one time in his life). In that case, which is cited more than once in today’s decision, the litigation had taken so long to make its way to the Supreme Court that many of the original land owners involved in the lawsuit had passed away and their heirs were left to see the litigation through. I’ve mentioned as well that sometimes these cases start to feel a bit like the situation that Charles Dickens wrote about in Bleak House with regard to yet another takings case, Palazzolo v. Rhode Island. There is, indeed, something be said to seeing the end of a case, particularly for the litigations and especially when the courts are already overburdened with litigation. Perhaps that is a discussion for another day, but it is worth noting that the Court seems to be paying attention to the timeline in these takings disputes.